KAUST DepartmentApplied Mathematics and Computational Science Program
Computer, Electrical and Mathematical Sciences and Engineering (CEMSE) Division
CEMSE Division, King Abdullah University of Science and Technology (KAUST), Thuwal, Saudi Arabia
KAUST Grant NumberOSR-CRG2017-3452
Preprint Posting Date2020-03-04
Online Publication Date2020-07-27
Print Publication Date2021
Permanent link to this recordhttp://hdl.handle.net/10754/662283
MetadataShow full item record
AbstractIn this paper, we propose a mean-field game model for the price formation of a commodity whose production is subjected to random fluctuations. The model generalizes existing deterministic price formation models. Agents seek to minimize their average cost by choosing their trading rates with a price that is characterized by a balance between supply and demand. The supply and the price processes are assumed to follow stochastic differential equations. Here, we show that, for linear dynamics and quadratic costs, the optimal trading rates are determined in feedback form. Hence, the price arises as the solution to a stochastic differential equation, whose coefficients depend on the solution of a system of ordinary differential equations.
CitationGomes, D., Gutierrez, J., … Ribeiro, R. (2021). A mean field game price model with noise. Mathematics in Engineering, 3(4), 1–14. doi:10.3934/mine.2021028
SponsorsThe authors were partially supported by KAUST baseline funds and KAUST OSR-CRG2017-3452.
JournalMathematics In Engineering
Except where otherwise noted, this item's license is described as This is an open access article distributed under the terms of the Creative Commons Attribution License.